In practice, it often happens that a limited liability company has several managing directors, some of whom have been appointed only formally and do not actually participate in the company’s operations or management. There may be various reasons for this. For example, in family businesses, all siblings may be appointed to the statutory body, or one director may be appointed only as a backup in case the other cannot perform their duties. It is also common for a member of the statutory body to be a person nominated by the parent company as its representative.
All of these individuals often have in common that they do not, in practice, interfere with the company’s management and therefore come to believe that they bear no responsibility toward it. The opposite is true.
Under the Commercial Code, a managing director has what is known as fiduciary responsibility toward the company — that is, the duty to act with professional care and loyalty to the company. Since the Commercial Code does not distinguish between a formal and an actual managing director, fiduciary responsibility — and therefore the obligation to act with professional care — applies to every person appointed to the position of managing director.
A situation where one managing director entirely leaves the management of the company to another without establishing control mechanisms or performing any supervision over the company’s management would be contrary to the duty of professional care.
A managing director is not relieved of liability even if they do not have access to the information or documents necessary for performing their duties from another managing director. They should have requested such information and, if it was not provided voluntarily, should have used all available legal means to obtain it and, based on its assessment, fulfilled their obligations toward the company.
According to established case law, it is not an excuse for a formal managing director that they were the one who uncovered the other (de facto) director’s misconduct, because if they had properly performed their own duties, such misconduct should not have occurred in the first place.
Therefore, if a managing director who actually manages the company causes it damage, the formal managing director will be jointly and severally liable for that damage, even if they were unaware of the activities of the de facto director.
If the company suffers damage, a managing director can avoid liability only if they can prove that they acted with professional care and in good faith. In cases of complete disinterest and lack of awareness of the company’s activities, a formal managing director will most likely fail to meet this requirement.
It should be noted that the exclusion or limitation of a managing director’s liability toward the company cannot be agreed upon in advance, as any such agreements are prohibited under the Commercial Code.
It can therefore be concluded that even a managing director appointed only formally bears full responsibility for the performance of their function and, together with the other directors, is jointly and severally liable for any damage caused to the company by a breach of their duties.
If you are unsure about the scope of your responsibilities as a managing director or need to assess the degree of legal risks associated with performing this role, do not hesitate to contact us. Our team is ready to provide tailored solutions, including the setup of appropriate control mechanisms among multiple managing directors.
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